Cheat and Get Promoted: The Political GDP Manipulation Cycle in China

Authors: SHEN Zekai

Date: 2024

Abstract:

This paper investigates the existence of a political GDP manipulation cycle in China, where local officials falsify economic data to enhance their promotion prospects. Using a panel dataset of 330 Chinese prefecture-level cities from 1998 to 2020, we compare official GDP growth rates with growth rates derived from nighttime light satellite imagery to estimate the extent of data manipulation. We find that the discrepancy between the two measures of economic growth exhibits a significant increase in the years of the National Party Congress (NCPC), suggesting a political cycle of GDP overstatement. Furthermore, while official data show a political business cycle with higher growth rates during NCPC years, nighttime light data indicate a significant decrease in economic activity during these periods. These findings challenge the conventional wisdom about China’s political business cycle and highlight the importance of verifying official statistics using alternative data sources. Our results have important implications for understanding China’s true economic performance and studying political business cycles in other countries where data reliability may be a concern.

Keywords:

Political Business Cycle, GDP manipulation, Promotion incentive, Nighttime light data, Economic growth

Current Status:

Work in Progress